The Solution To The Student-Loan ‘Crisis’? Depends On How You Define It

"Student-loan debt is widely perceived to be a problem, even a crisis. Experts, advocates, and policy makers have been debating how to tackle it for years, and with the reauthorization of the Higher Education Act on the horizon, those conversations are likely to pick up steam," The Chronicle of Higher Education reports.

"The many recent proposals to help borrowers have ranged from giving prospective students better information on college costs to letting borrowers refinance their loans to putting more people into income-based repayment plans.

Each policy recommendation is presented as a solution. But the so-called solutions are based on different understandings of what, exactly, the problem is.

So what’s actually wrong with the student-loan landscape? Here are four ways of defining the student-loan problem, and possible solutions that might fit with each.

Problem: Borrowers don’t know what they’re getting into. …

Potential solutions: Giving students, especially first-generation and low-income ones, more help in choosing a good-fit college; providing better financial-aid information further in advance; and expanding or improving student-loan counseling. …

Problem: Students are borrowing too much. …

'We know there are instances where students are borrowing too much,' says Justin Draeger, president of the National Association of Student Financial Aid Administrators. His group has argued that colleges should have the authority to limit how much groups of students, say those in a certain program or enrolled part time, can borrow. ...

Potential solutions: Allowing colleges to limit the debt levels of particular groups of students; encouraging timely graduation; reducing the cost of college; and increasing public support for higher education. …

Problem: Borrowers can’t afford their loan payments. …

Potential solutions: Better preparing students for a challenging job market; making it easier to choose and enroll in an income-based repayment plan; reducing the interest students pay on their loans; and making it easier for distressed borrowers to discharge their loans in bankruptcy. …

Problem: Repayment options are confusing and cumbersome. …

Potential solutions: Reducing the number of repayment plans available; automatically placing all borrowers or struggling borrowers into an income-based repayment plan; and taking automatic payments out of borrowers’ paychecks."

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